Wholesale prices in Japan jumped by 10% in April compared to one year previously, the fastest year-on-year rise on record in the country.
The sharp increase in the corporate goods price index (CGPI), which measures wholesale prices charged by companies for goods and services, was driven by rising energy prices and a weakened yen.
April’s gain follows on from a revised 9.7% increase in March, higher than the median market forecast of a 9.4% rise.
Unlike many other central banks around the world, the Bank of Japan (BOJ) has maintained a relaxed approach monetary policy, confident that the rise in inflation is not bringing long-term price expectations to its 2% target.
The BOJ last month predicted that core consumer inflation will hit 1.9% in the current fiscal year before dropping to 1.1% in 2023 and 2024 – a sign it sees the current situation as a short-term hurdle.
But analysts expect consumer inflation to remain around 2% in the coming months, putting Japan’s fragile economic recovery at risk as companies are forced to raise prices.
Japanese firms have been reluctant to pass on rising costs to households, fearful of scaring off consumers with price increases. With no sign of prices stabilizing though many will soon be forced to make such moves.
“Companies have been doing what they can to absorb rising costs, but the situation is unsustainable and many will soon be forced to pass on additional expenses,” said Highview Management’s Matthew Lewis.
“Whilst Japanese consumers accept that some price increases are inevitable, if they view the hikes as too sharp it is likely to lead to a spending decline.” Lewis added.
A report on Friday is expected to show Japan’s core consumer price index (CPI) rose by 2.1% in April from a year earlier, slightly higher than the BOJ’s target.